Economists divided over US tapering

‘ABOUT RIGHT’:：Fifty-seven percent of economists surveyed by a business economics association agreed with the gradual tapering of the US Fed’s accommodative policies

AP, WASHINGTON

Tue, Feb 25, 2014 - Page 15

Business economists are almost equally divided over whether the US Federal Reserve will pare back bond purchases at the current pace through the end of the year or take a small break to let the economy recover further.

The views were unveiled yesterday by the US National Association for Business Economics (NABE).

The association conducted its twice-a-year survey of 230 members between Jan. 30 and Feb. 6, before US Federal Reserve Chair Janet Yellen’s first appearance before US Congress.

About 43 percent of the association’s members thought the Fed would complete its so-called “tapering” in the fourth quarter, while about 42 percent thought the tapering would finish next year or later, data showed.

At each of the last two policy meetings, the Fed cut bond purchases by US$10 billion to the current pace of US$65 billion a month. There are seven meetings left this year.

A majority of those surveyed agreed with the Fed’s gradual end to its accommodative stance, with 57 percent saying current monetary policy is “about right.”

About 37 percent thought it was “too stimulative,” data showed.

Cutting back on the bond purchases and the prospect of further cutbacks has already prompted mortgage rates to rise.

Most respondents thought the Fed would wait until next year to start raising its key short-term interest rate above the current level near zero.

Yellen told Congress earlier this month that the Fed would keep the rate near zero “well past” the time the unemployment rate falls below 6.5 percent, as long as inflation remains low.

The unemployment rate was 6.6 percent last month, a five-year low.

About 36 percent of respondents thought the Fed would raise the federal funds rate in the first half of next year, while 37 percent thought the rate hike would come in the second half.

Just 12 percent thought a hike would occur in the second half of this year, while 15 percent thought it would happen in 2016 or later.

As for government spending, 21 percent thought fiscal policy was “too stimulative,” while 37 percent thought it was “about right,” the survey showed.

About 39 percent thought fiscal policy was “too restrictive.”

Nearly all the respondents — or 83 percent — did not think Congress should put a permanent cap on the debt limit at its current level of about US$17 trillion.

Respondents were also split on the economic impact of the new federal healthcare law.

While 18 percent thought the Affordable Care Act would boost growth, 42 percent thought it would have no impact and 30 percent thought it would hurt growth.